It’s often argued that money can’t buy you happiness, but a new study has found the opposite to be true.
New research by economists Betsey Stevenson and Justin Wolfers from the University of Michigan found a robust link between income and well-being among both the poor and the rich.
The study measured ‘happiness’ with the following question:
“Please imagine a ladder with steps numbered from zero at the bottom to ten at the top. Suppose we say that the top of the ladder represents the best possible life for you, and the bottom of the ladder represents the worst possible life for you.
“On which step of the ladder would you say you personally feel you stand at this time, assuming that the higher the step the better you feel about your life, and the lower the step the worse you feel about it?
“Which step comes closest to the way you feel?”
The researchers found that once basic needs had been met, further income increased well-being. This is a different finding to an influential study conducted in 1974, where Richard Easterlin discovered increasing average income did not raise average well-being.
According to the new study from the University of Michigan, all those surveyed with an income of £306,250 a year or more described themselves as ‘very happy’.
All those earning £61,250 a year or more also described themselves as either ‘very happy’ or ‘fairly happy’.
Assuming money really can buy you happiness, we should probably also accept it can also create challenges in life.
Financial Planning is equally important for those earning £61,250 a year as it is for those with an annual income of £306,250, or anywhere in between.
Happiness, or at least satisfaction, is a more likely outcome when proper Financial Planning has taken place, enabling you to understand and plan to achieve your goals in life.
Our Financial Planning process can’t guarantee happiness. It can guarantee that you will have a much better understanding of your goals and what it will take to achieve them.
